The chancellor’s major announcement was that councils will be able to increase council tax by up to 2% to fund adult social care.
Photograph: Dave and Les Jacobs/Blend Images/Corbis

Care homes across Britain face financial meltdown after George Osborne failed to fill a black hole in their funding, industry bosses have warned.

The chancellor revealed a string of measures in the autumn statement designed to support the finances of the social care sector, which is under growing pressure from a squeeze in the fees councils pay towards residents and a rise in costs for care home operators.

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The chancellor’s major announcement was that councils will be able to increase council tax by up to 2% to fund adult social care. This council tax “precept” could raise up to £2bn a year by 2020, which would fund more than 50,000 care home residents or the care of nearly 200,000 people in their own homes.

In addition, Osborne wants to loosen restrictions on student nurses, which will allow care homes to use fewer agency workers, who are more expensive.

He also announced a major review into integrating health and social care by 2020. At present, healthcare is managed by the NHS while local authorities control social care. However, as Britain’s population ages, critics claim this is inefficient and leading to elderly patients being stuck in hospital beds when they should be in a care home.

The Better Care Fund, an organisation designed to encourage local authorities and the NHS to cooperate, will support the review and has been given £1.5bn in extra funding. The review could lead to councils being able to keep all of their revenue from business rates to fund public healthcare in their area.

However, Martin Green, chief executive of Care England, said the package of measures did not address the urgent funding crisis facing care homes.

“I think this is a missed opportunity,” Green said. “The 2% won’t be levied by every council and the challenge is that it won’t be uniform across the country.

“Even if it were, it won’t be enough. This is over the life of the parliament, some of the cash issues are now.

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“What will happen next is attrition, in that care homes will begin going to the wall. It won’t happen immediately, but it will happen. We have already seen closures in Northern Ireland. I am worried about small operators, who can’t manage closures. When the national living wage is introduced [in April], they may not have enough money in their bank account and could simply be declared bankrupt.”

Green also criticised the Better Care Fund, which was formed during the last parliament.

“It doesn’t have a track record of putting funds into the frontline [of care], it provides money for the NHS and local authorities.

“The NHS has a culture problem. It only thinks about itself. It doesn’t think about the best outcome for the patient, it’s about the system.”

Janet Morrison, chief executive of Independent Age, said: “While we welcome additional money for the NHS and the state pension, when it comes to social care, the chancellor has proved himself short of money and ideas.

“If every council in England increases council tax by the full 2% to fund social care, this could raise only £500m a year, just a fraction of the £2.9bn annual shortfall in adult social care budgets predicted by 2020. Councils would need the power to raise council tax by more than 10% to plug the social care funding gap.

“Nor, despite warnings that the NHS and social care are heavily interlinked, have we seen the kind of ambitious, strategic, long-term vision for social care that we have with the Five Year Forward View for the NHS.”

Morrison added: “We need the government to lead an honest debate about the future of social care in this country, and how we deliver these vital services to growing numbers of older people on ever-shrinking budgets.

“Otherwise, the announcements are likely to mean more older people stuck in hospital beds, more care home closures, more 15-minute care visits and increased rationing of help for older people to do basic things like getting dressed, washing or feeding themselves.

“We understand that there are no easier answers and only difficult choices for the chancellor. But without anything beyond the measures announced today for a social care system in crisis, it feels like the government are passing the buck to local authorities to both find the money and take the political hit of increasing taxes.”